New Model:

Unlisted Investments

Elias Masilela

CEO: Public Investment Corporation

Media launch: 4 December 2012

2

Presentation Agenda

1. Background

Portfolio growth & asset allocation

2. Unlisted investments & the new model

Developmental investment policy

Fund Investment Panel (FIPs)

Investment process

3. Implementation: next steps

3

Background

Initially in apartheid era, GEPF was a bond and money market only portfolio.

Gradually changed since democracy in 1994, incorporating modern investment

principles.

Diversified asset base to hold equities, property, bonds, cash and money market

instruments, offshore investments, including listed and unlisted instruments.

Recently, along with launch of GEPF’s developmental investment (“DI”) policy, unlisted

investments also seen as important vehicle through which investment should occur.

Brings both diversification to the GEPF portfolio as well as contributing to development in

SA and the African continent.

4

Background

5% of overall GEPF portfolio to ultimately be invested in unlisted investments

(currently, this would be R60 billion)

Isibaya fund is the primary vehicle within the PIC that facilitates unlisted

investments

Isibaya thus far has committed about R13billion

Concept of not only financial return, but also a social return: aiding

development & promoting long-term sustainable returns across all asset

classes

5

Background

GEPF asset base currently approximately R1,2 trillion; impressive growth over time.

0

200

400

600

800

1000

1200

1400

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

AUM (R billions)

AUM

Source: PIC & GEPF annual reports

6

Background

GEPF AUM growth and AUM compared to GDP:

Source: PIC & GEPF annual reports

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

AUM as % of GDP

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

AUM growth rate

Growth rate

7

Background

A 10% target of GFCF would have significant impact:

Source: SARB, OECD, WB, PIC

8

Background

Current GEPF portfolio invested as follows:

Source: PIC

Unlisted

Investments

10

External investment = 10%

Explicitly focused on developmental investing (DI)

Recognises the link between the macro-economy and asset performance

Creates a reliance on good honest partnerships

Key Features of new Mandate

Response to underlying structural imbalances

11 11

Developmental Investments (DI) Economic

Infrastructure

Social

Infrastructure

Environmental

Sustainability

Priority Sectors

Investments &

SMMEs

Energy

Logistics Network

Water

Commuter

Transport

Liquid Fuels

Broadband,

telecoms

Affordable Housing

Healthcare

Education and

skills development

Renewable energy

Green buildings

Energy Efficiency

Recycling

Clean Technology

SMMEs

Small cap stock

Exchanges

Manufacturing

Tourism

Agro – processing

Value chain mining

BBBEE

Five Developmental Investments Funds established in line with the GEPF DI Policy.

Key focus will creating sustainable returns while ensuring developmental impact.

Key Focus :

Economic and

infrastructure

development

Key Focus:

Social development

and poverty

alleviation

Key Focus:

Clean Energy and

green economy

Key Focus:

Job creation, poverty

alleviation, and

economic growth

12

Unlisted Investments Split

Developmental

Investments

5%

Private Equity

5%

Property

5%

Africa

5%

Unlisted Investments

Funding Instruments

• Senior Debt

• Subordinated Debt

• Mezzanine

• Quasi-equity

• Pref shares

• Ordinary Equity

Funding Instruments

• Senior Debt

• Subordinated Debt

• Mezzanine

• Quasi-equity

• Pref shares

• Ordinary Equity

• Venture capital

Funding Instruments

• Senior Debt

• Subordinated Debt

• Mezzanine

• Quasi-equity

• Pref shares

• Ordinary Equity

Funding

Instruments

• Private

Equity

• Properties

• DI

• Listed Equity

13

Fund Investment Panels (FIPs)

Fund Investment Panels (FIPS)

PropertiesEconomic

Infrastructure

Priority Sector &

SMMEs

Private Equity

and Africa

Investments

Social

Infrastructure &

Environmental

Members

· PIC Non- Exec

(Chairman)

· Industry Experts

· PIC CEO

· PIC CIO

· PIC - GM properties

· GEPF – Principal

Officer

· GEPF - Head of

Actuarial &

Investments

· GEPF - Investments

Manager

Members

· PIC Non- Exec

(Chairman)

· Industry Experts

· PIC CEO

· PIC CIO

· PIC – Fund Principal

· GEPF – Principal

Officer

· GEPF - Head of

Actuarial &

Investments

· GEPF - Investments

Manager

· Members

· PIC Non- Exec

(Chairman)

· Industry Experts

· PIC CEO

· PIC CIO

· PIC – Fund

Principal

· GEPF – Principal

Officer

· GEPF - Head of

Actuarial &

Investments

· GEPF -

Investments

Manager

· Members

· PIC Non- Exec

(Chairman)

· Industry Experts

· PIC CEO

· PIC CIO

· PIC – Fund

Principal

·

· GEPF – Principal

Officer

· GEPF - Head of

Actuarial &

Investments

· GEPF -

Investments

Manager

Members

· PIC Non- Exec

(Chairman)

· Industry Experts

· PIC CEO

· PIC CIO

· PIC – Fund

Principal

· GEPF – Principal

Officer

· GEPF - Head of

Actuarial &

Investments

· GEPF -

Investments

Manager

14

Pipeline/

origination Due Diligence Deal structuring

and decision

Screening and

initial Deal

structuring

Implementation and

monitoring

• Proactive

origination and

development of

projects

• Deal sourcing

• Walk in

opportunities

• Co -investments

Detailed due-diligence of

opportunities:

• Development outcomes

• Feasibility and potential

value creation plan and

returns

• Technical viability and

competitiveness

• Financial viability

• Management

• Legal

• Environmental impact

• assessing development

impact and

sustainability

• Etc.

Ongoing monitoring of client

performance after funding is

disbursed

Interventions in businesses

experiencing difficulties

• Business support

• Restructuring

• Etc.

Legal agreements

Meeting conditions

Disbursement

Basic assessment

• Fit to mandate

• High-level risk

analysis

• Preliminary ESG

assessment

Type of funding

assessment (snr

debt, Jnr debt, Mezz,

PIK note, Pref shares,

Ord shares,), quasi

Equity etc

Credit risk analysis

Pricing and

structuring

Stress testing of the

structure

Deal presentation to

relevant committees

and approvals

Investment process (high level)

15

Next Steps

Finalising Private Placement Memorandums (PPMs)

Finalising the appointment of experts to sit on FIPs

We have progressed well towards the implementation of the model and we

target to have the first sitting of FIPS by end first quarter 2013.

Monitor impact of investments going forward, not only the investments

themselves

Information will be made available for potential partners on website

Implementation expected to commence in first quarter 2013

Conclusion